Half of the new houses being built in Salt Lake County are priced above $175,000, which puts them out of the reach of 85 percent of potential buyers, says Salt Lake City-based appraisal firm Gary Free and Associates.
That means, says Roland Robison, market analyst for the firm, "We're facing a probable glut of upscale housing and an extreme shortage of affordable housing."Robison said inventories of high-priced houses continue to grow in the south end of the county, resulting in "some cases of fairly deep discounting" in $200,000-and-up homes.
Those conclusions come from Gary Free's second-quarter "Decision Systems Housing Report," which Robison said is compiled by physically inspecting every housing project on the market and tabulating inventories by area, price range and zoning.
The report shows 49.59 percent of new homes in Salt Lake County and 25.36 percent in Utah County are priced above $175,000, a figure that only 15 percent of households in the two counties can afford.
This is not the first time that the Gary Free quarterly reports have warned of possible softening in high-end housing in south Salt Lake County. The report says land speculators, government entities and home builders must all tackle the need for low- and moderate-income housing if the current strong market is to continue.
"Nearly 60,000 people have moved to Utah over the last 3 1/2 years," said Robison, "generating a need for almost 20,000 new dwelling units, in addition to about 30,000 units to house our natural growth. But if we're not willing or able to provide the type of housing that is needed to support this level of economic growth, it will be short-lived."
Utah currently leads the nation in job growth, he noted, with an increase of 5.7 percent forecast for this year in Utah compared to less than 2 percent nationwide. This brings people to the state and generates high demand for new housing. Unfortunately, except for luxury housing, local inventories continue to be very lean.
Ironically, said Robison, some converging trends - stabilizing interest rates, increased land values and restrictive municipal zoning - could combine to worsen the problem.
"We currently have many uninformed builders making speculative commitments to pay top dollar for low-density, high-priced lots. This gives developers a false reading on the real demand for upscale housing," said Robison.
"Also, falling interest rates have allowed land values to rise by more than 300 percent over the past three years in most areas. With interest rates now stabilizing, a market adjustment is inevitable. When the bubble bursts, the uninformed will pay the price."
Robison said the trend of municipalities requiring one-third-acre to one-acre lots for single-family homes while totally eliminating multifamily zoning also worsens the problem.
"Today's complex market requires that government officials, developers and lenders start dealing with the realities of the housing market to avoid shortsighted decisions," he said.